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Fund Scandals Threaten
to Weigh Further on Slumping 401k
Plan Participation
GREENWICH, Conn., Nov. 25, 2003: -- The
recent spate of mutual fund trading allegations could further
exasperate thedeclining 401(k) participation rates, which
have declined for the second year in a row, according to an
annual survey by Plan Sponsor, a leading information
provider to the retirement plan community.
The Seventh Annual Defined Contribution Survey of more than
3,200 401(k) plans, representing $500 billion in assets and 8
million participants, revealed a drop in plan participation
rates across every market segment. The survey, compiled prior
to the recent wave of mutual fund allegations, found that
participation rates dropped another 3.6% this year, resting at
72.6%, in addition to the average 2.5 percentage point decline
reported in the 2002 survey.
"Participants were already nervous about declining investment
markets, soft job prospects, and increased healthcare costs --
now they have mutual fund trading to worry about as well,"
said Nevin Adams, Editor-in-Chief of Plan Sponsor's Magazine.
However, asked to rate the level of participant services from
their current 401(k) provider, employers were least satisfied
with their provider's participant education programs and
participant communication materials, with call centers only
slightly better rated.
"Clearly employers are looking for more from their current
education programs," noted Adams, "not necessarily because
they are ill-conceived or poorly designed. Participants are
concerned -- about their investments, and their prospects for
a satisfying retirement." Employers can help by acknowledging
the media reports, and clarifying their actions in response to
the allegations, particularly if one of their plan options is
involved.
Although cutbacks in company matching dollars have been widely
reported, and occasionally blamed for the continued drop in
participation, the survey revealed that less than 12% of
respondents have changed or plan to change, the company match
-- and more than half of those say they planned to increase
the level of their current match. TOP
"While investment markets have rebounded nicely over the past
six months, participants are clearly cutting back on what they
view as discretionary spending," comments Adams.
"Unfortunately, saving for retirement is only discretionary in
a short-term sense. Sooner or later, it is a bill that has to
be paid."
The annual Defined Contribution Survey appears in the November
issue of
PLAN SPONSOR magazine and can be seen on. TOP
The 2003 Defined Contribution Survey was
conducted in the summer of 2003. A record number of 3,247
managers of defined contribution plans participated. |
